McDonald's, rivals see diminishing appeal for kids meals

Experts also point to a more tech-savvy generation of children who age out of kids meal toys faster than in the past as a factor in the sales drop-off. (William DeShazer, Tribune photo)

Julie Oelling's 6-year-old daughter Zoe started asking to go to McDonald's for Happy Meal toys when she started preschool two years ago.

"When she was 4, it was kind of a big thing to do, but when she turned 5, it tapered off," Oelling said, adding that it's been about six months since her daughter's last request. "I'd even say she's starting to outgrow it now depending on what the toy is."

Long portrayed as a key contributor to childhood obesity, fast-food kids meals may be losing their appeal to youngsters — and, more importantly, their parents. The emergence of dollar menus among restaurants have given price-conscious parents a powerful incentive to choose an a la carte burger or fries rather than ponying up nearly $4 for a kids meal.

Industry observers also say the toys served up with every meal aren't capturing older kids' attention, while others add that children are simply aging out of the meals earlier as they're becoming more technologically savvy.

According to the NPD Group, visits to fast-food restaurants in which kids meals were purchased have declined every year since 2007, falling 5 percent in 2011 from the prior year.

"I don't know if there's a silver bullet here, or a smoking gun that would indicate" why it's happening, said a McDonald's franchisee. "I think there's a combination of factors at play."

"It's something we'd love to reverse," he said.

Fast-food kids meals have been subject to intense scrutiny in recent years. Activist groups have zeroed in on the products and accompanying toy, saying they introduce children to a lifetime of unhealthy eating. San Francisco and a number of other cities have enacted regulations for nutritional content of fast-food kids meals when toys accompany them. Regulations vary by city.

While McDonald's is the largest player in fast food by far, most major chains, including Wendy's, Burger King and Subway, offer kids meals. Burger King declined to comment for this story, and Wendy's did not respond to requests for comment.

In a statement, McDonald's spokeswoman Danya Proud said the chain is "seeing behavior shift slightly among what is being ordered" for children, "because families are eating differently than they used to when they go out."

"Kids are curious and may share items with their parents, or they still stick to their favorite Happy Meal," she said, adding that "Family visits to McDonald's remain strong and slightly higher than the rest of the industry."

Darren Tristano, executive vice president of Technomic, a Chicago-based food industry consulting firm, estimated that McDonald's has the biggest share of kids meal sales in the fast-food industry, as much as 25 percent of the total. He doubts McDonald's Happy Meal sales have been declining.

"I would put it flat at worst," he said. But with the rest of the chain's business soaring, a major product line stuck in a holding pattern would be struggling by comparison.

The Oak Brook-based burger giant is riding nearly nine years of global same-store sales gains. During 2011, McDonald's total U.S. sales increased 5 percent to $8.5 billion. By comparison, total quick-service industry sales rose 2 percent in 2011 to $240 billion, according to NPD.

Happy Meal sales account for about 10 percent of McDonald's U.S. sales, the company said, but the meal, and toys in particular, have been an important vehicle to get kids and their parents to eat at the Golden Arches. Higher incidence of family meals at fast-food restaurants tends to boost the average check, an important metric of success in the restaurant industry.

"They're very important if you think about the roots of what (McDonald's Corp. founder) Ray Kroc was trying to do: Create an environment where families could have a meal at an appropriate price," Tristano said.

One executive familiar with McDonald's business said that Happy Meals have been losing older children for at least a decade.

"First it was around 11 or 12, then it went from 10 to 11, then 9 and now anytime after 8 years old, kids aren't satisfied with the Happy Meal offering," the executive said, adding that was a reason the company introduced the "Mighty Kids" Happy Meal, with larger entrees like double cheeseburgers and six-piece chicken nuggets, in 2001.

Toys have been a big problem in retaining older children, the executive said, adding that they expect more, thanks to increased exposure to technology.

Others, like former McDonald's franchisee Irwin Kruger, said the shift is "probably more correlated with education and income, or people who have a stronger sense of the importance of a balanced meal. But you have to throw in the cost of cheaper food on the dollar menu."

Bonnie Riggs, NPD restaurant industry analyst, agreed, noting that mothers have "probably switched to the value menu because it was cheaper than the kids meal."